Deutsche Bank Bribery May Prompt Scrutiny, Lawyers Say

April 23 (Bloomberg) -- A former Deutsche Bank AG
salesman’s admission in a Japanese court that he bribed a
pension fund executive with lavish entertainment could attract
the attention of prosecutors in other countries.

The U.S. Department of Justice and other authorities may
examine whether the practice was widespread at the bank and led
to any violations of bribery laws after Shigeru Echigo testified
that he acted on the instructions and encouragement of his
management, U.S. and U.K. lawyers not involved in the case said.

Prosecutors say the former salesman spent about 900,000 yen
($8,800) on meals and golf outings with former Mitsui & Co.
employee Yutaka Tsurisawa 15 times from April to September 2012.
Echigo admitted to the charges at the start of his trial in
Tokyo yesterday.

“The worry for Deutsche Bank is that Echigo’s testimony
could cause DOJ to take a hard look at the bank’s relationships
with Japanese government officials to find out if the same
things are taking place,” said Roger A. Burlingame, a former
U.S. federal prosecutor now based in London at Kobre & Kim LLP.

Deutsche Bank, based in Frankfurt, is probably already
having discussions about the case with prosecutors in other
jurisdictions, said Neil Swift, a criminal defense lawyer at
Peters & Peters Solicitors LLP in London. The U.S. Foreign
Corrupt Practices Act and U.K. Bribery Act encourage companies
to self-report potential violations and doing that can reduce
any penalties.

Expensive Entertainment

“I would strongly suspect that the moment this was
initially reported internally within the bank, it was escalated
right up the company,” Swift said. “I would be surprised if
Deutsche Bank hadn’t already addressed this issue with the
appropriate authorities in the United States.”

Armin Niedermeier, a spokesman for Deutsche Bank, declined
to comment on the case. Japan’s Financial Services Agency
ordered the lender to improve compliance at the Japanese unit in
December, and the bank disbanded the pension sales team.

Echigo entertained Tsurisawa in return for buying 1 billion
yen of investment products for Mitsui’s retirement fund, and to
procure future business, prosecutors said. Tsurisawa was
convicted last month and given a suspended 18-month prison
sentence.

Information about the case may already have been shared by
Japanese prosecutors with their counterparts in other countries
where Deutsche Bank does business, the lawyers said.

Foreign prosecutors would want to know if managers were
aware of Echigo’s conduct and if the practice was part of a
broader pattern of using expensive entertainment in order to win
business. Lawyers for the salesman showed the court evidence
based on police and prosecutors’ interviews with his former
bosses and colleagues that managers encouraged the spending.

Public Funds

“If there is evidence that this goes higher, they will
start to look at it much more closely,” said Andrew Oldland, a
lawyer at Michelmores Solicitors in London who advises clients
on anti-bribery laws and was previously a prosecutor at the
U.K.’s Serious Fraud Office.

U.S. law bans payments to government officials, which
narrows any potential inquiries, while the U.K. Bribery Act
covers payments to public agents and private company executives.
Japanese prosecutors consider Tsurisawa to effectively be a
civil servant because the money that Mitsui, his employer,
oversaw included public funds.

U.K. prosecutors are unlikely to pursue Deutsche Bank over
the case, even though the law covers companies with operations
in Britain, regardless of where the act is committed.

“It’s unlikely the SFO would want to commit the level of
resources that’s required,” said Stephen Parkinson, the head of
criminal litigation at Kingsley Napley LLP in London. “They
might contact the company to ask what steps it’s taking to
investigate itself.”

FCPA probes typically end in settlements, with companies
paying fines and admitting wrongdoing.

Simon Varcoe, a spokesman for the SFO, declined to comment.
The press office for Bafin, the German finance regulator, also
declined to comment.